Macro Morning

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Friday night saw European stocks hold their ground while Wall Street lost momentum and flipped over, taking stock futures down with them as Asian markets look for another poor start to the trading week. The continuing war in Ukraine is still weighing on bond markets as well, with the 10 year Treasury range trading around the 2% level which safe havens like USD saw a very strong bid as Yen buying dropped off markedly. The Australian dollar fell back despite some rises in commodities, with Brent crude up back above the $112USD per barrel level, while gold steadied but was again pushed back to just below the $2000USD per ounce level.

Bitcoin had a mid week breakout that went nowhere, quickly retracing back down to the $39K level where it traded without much fuss over the weekend, anchored back at the weekly lows. This move had all the technical hallmarks of a bull trap so now we wait for a proper retracement below the $37K level next:

Looking at share markets in Asia from Friday’s session, where mainland Chinese shares were selling off going into the close, particularly tech stocks but the Shanghai Composite managed to scrape by with a scratch session, up 0.4% for the day and closing out the week at 3309 points. Meanwhile the Hang Seng Index can’t catch a break, falling 1.6% to close at 20553 points. Price action on the weekly chart shows how much this market has broken down, now falling to the 20000 point level as weekly momentum moves into extremely oversold mode. There’s not much upside potential here:

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Japanese stock markets didn’t receive any help with a lower domestic currency, as the Nikkei 225 closed 2% lower at 25162 points. The daily futures chart was showing a bullish engulfing candle brewing on the possibility of a bottom, but the last couple of closes don’t look so promising with the potential to rollover again here and break below the 25000 point level, as daily momentum remains oversold and not in its favour:

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Australian stocks were trying to be more resilient with the ASX200 finishing 0.9% lower to retrace below the 7100 point level, closing at 7063 points. SPI futures are indicating a small jump at the open of the new trading week, currently up 20 points or so, with the Aussie dollar possibly helping steady the market as it rolled over on Friday night. I keep mentioning it, but there’s still considerable resistance overhead at the previous weekly/monthly support levels so watch daily momentum that needs to get back into the positive zone soon before considering any long opportunities:

European shares had a modest and relatively quiet session to finish the trading week with small upticks across the continent, although post close futures pulled most of those returns back to the scratch side. The Eurostoxx 50 index finished nearly 1% higher at 3686 points but the daily chart shows most of this taken back to the previous daily close, possibly fulfilling a dead cat bounce. To properly bottom out here requires a solid close above the former support, now staunch resistance at the 4040 point area with a swing trade on its way beforehand with a solid close above the high moving average at the 3800 level:

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Wall Street sold off again and did so more smartly than expected, with the NASDAQ finishing 2% lower while the S&P500 lost just over 1.2% to finish at 4204 points. This keeps price action contained here below four hourly and daily overhead ATR resistance and follows my contention that the previous bounce was nowhere near enough to get the market fully out of trouble. The proper target here is resistance at the weekly highs around the 4400 point level, which is still a long way to go – keep watching oil markets for the catalyst, IMO:

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Currency markets remain volatile and after the slightly hawkish ECB, but then higher inflation expectations in the US on Friday night, Euro fell back to the 1.09 handle wiping out all of the mid week gains and returning to the start of week position. The Ukrainian invasion continues to keep a lid on risk taking here with the four hourly chart showing a return to the dominant downtrend, with this week’s target at the previous weekly lows near the 1.08 level:

The USDJPY pair continued to push higher, breaching the 117 level on Friday night and making another new daily and weekly high. My contention of Yen safe haven buying to return here hasn’t transpired, despite more bad news as USD becomes the safe haven choice with momentum now extremely overbought. Price action should revert to mean here soon, but it seems new multi year highs cannot be discarded lightly:

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The Australian dollar rolled over as USD gained strength against everything despite higher commodity prices, making a new weekly low in the process, falling below the 73 handle. The next target here seems to be the previous intraweek low at the 72.40 level that had strong buying support as this market moves into a range:

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Oil markets are consolidating following the big leap higher and subsequent reversal as OPEC+ ramps up production with Brent crude managing to finish slightly higher on Friday night at the $112USD per barrel level with a calmer session. While daily ATR support is broken, its only nominally so with definite support at the $106 level, remaining well above the psychologically important $100USD level as well. Watch for another breakout above the $114 level next:

Gold is showing a similar trajectory, consolidating after getting way ahead of itself, and while it did pull back intrasession it managed to finish just below the $2000USD per ounce level. Price should be around the $1950 level instead as shown by that lower trendline, which is where this could end up this week if daily momentum inverts from its extremely overbought levels, but so far we might be playing sideways catchup instead, before another leg up:

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Glossary of Acronyms and Technical Analysis Terms:

ATR: Average True Range – measures the degree of price volatility averaged over a time period

ATR Support/Resistance: a ratcheting mechanism that follows price below/above a trend, that if breached shows above average volatility

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CCI: Commodity Channel Index: a momentum reading that calculates current price away from the statistical mean or “typical” price to indicate overbought (far above the mean) or oversold (far below the mean)

Low/High Moving Average: rolling mean of prices in this case, the low and high for the day/hour which creates a band around the actual price movement

FOMC: Federal Open Market Committee, monthly meeting of Federal Reserve regarding monetary policy (setting interest rates)

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DOE: US Department of Energy 

Uncle Point: or stop loss point, a level at which you’ve clearly been wrong on your position, so cry uncle and get out!wrong on your position, so cry uncle and get out!